Will a Prenuptial Agreement Be Recognized Under New Jersey Medicaid Eligibility Law

A prenuptial agreement is “an agreement (contract) between prospective spouses [fiancées] made in contemplation of marriage and to be effective upon marriage that fixes the respective financial obligations and consequences of married couples upon death and/or divorce.” Jonathan E. Fields, Prohibited Subject Matter in Prenuptial Agreements, § 1.01 2006 Family Law Update (Ronald L. Brown Laura W. Morgan, eds., Aspen Publishers, 2006). Parties to a premarital agreement may contract with respect to mutual property rights and obligations; rights to acquire, manage, and dispose of property; disposition of property on separation, dissolution, or death; modification or elimination of spousal support; wills and trusts; and death benefits from life insurance policies. Uniform Premarital Agreement Act § 3(a), Uniform Laws Annotated p. 373. Since prenuptial agreements provide for the distribution of assets upon death or divorce, they can serve an important role in estate planning. They also allow couples to specify which assets should be considered marital property and which assets should be treated as personal property upon the dissolution of the marriage. Many couples use prenuptials as a guide that structures their finances according to a mutually predetermined plan. In addition, Prenuptial agreements allow an individual to protect a family business or specific piece of property from potential claims by a former spouse. Allison A. Marstona, Planning For Love: The Politics of Prenuptial Agreements, 49 Stan. L. Rev. 887 (1997).

Prenuptial agreements were once widely viewed as contemplating divorce and contrary to public policy, but in recent times have gained wide acceptance in many jurisdictions either by judicial declaration, through adoption of the Uniform Premarital Agreement Act (“UPAA”), or by other statutes expressly providing for their acceptability. New Jersey adopted the UPAA on November 3, 1988. N.J.S.A. §§ 37:2-31 to -41. Prior to the enactment of the UPAA, the validity of prenuptial agreements in New Jersey was governed by the holding in Marschall v. Marschall, 195 N.J Super. 16 (Ch. Div. 1984). Susan Reach Winters, Marriage Agreements – Prenuptial Agreements, 16 N.J. Prac., Legal Forms § 47:1 (4th ed.)(2014).

Although prenuptial agreements are now generally afforded acceptance they still remain a cause for concern for the court due to a potential of unequal bargaining power and because the parties do not stand at arm’s length to each other, rather there is a relationship of the greatest trust and confidence. Courts strictly scrutinize prenuptial agreements accordingly and are often unwilling to treat them like other contracts. An additional consideration with regard to prenuptials is that federal law may preempt spouse’s contractual terms. For example, if a spouse attempts to give waiver of rights to an Employee Retirement Income Security Act (“ERISA”) qualified pension plan in a prenuptial agreement courts have held this waiver to be invalid because federal law requires that an actual “spouse,” not merely a fiancée who signs a prenuptial agreement, of a plan participant waive such right.

In 2013 New Jersey Governor Chris Christie signed a bill that amended both N.J.S.A § 37:2-38 and N.J.S.A § 37:2-32. The new law restricts judicial interpretations of prenuptial agreements by mandating that judges evaluate the agreements as of the date of their signing, not the date of enforcement. Prior to the new law courts looked to the procedural and substantive fairness of prenuptial agreements prior to enforcing them. Generally, a contract would be found unconscionable if its enforcement would leave one spouse without means of reasonable financial support, however the new law has strengthened the enforceability of premarital agreements. In addition, a prenuptial agreement may be deemed unconscionable now only if one party did not receive full disclosure of assets, was without counsel or was otherwise uninformed or disadvantaged.

This new law has effectively removed judicial consideration of changed circumstances. For this reason it is important that both parties consult with independent legal counsel when signing a prenuptial agreement. Doing so potentially fosters important communication about important issues and ensures fairness and full understanding by both parties.

To discuss your NJ Medicaid eligibility matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.